If you want to secure your property to protect your family’s future, a Family Trust is the way to go.
Bristol wills and probate specialists E.L.M Legal Services explain how trusts work in this short video, which is followed by some of the most frequently asked questions.
If my house is owned by a trust then it won’t be mine?
That’s correct. In order to prevent a third party from taking something belonging to you away, we have to change the legal ownership of that asset out of your name as a private individual into “another name”.
So, if a trust owns my house, who controls the trust?
The trust is controlled by trustees. The person establishing the trust (you, the settlor) decides who the initial trustees are going to be. Therefore, it is the settlor’s choice as to who will work alongside them as co-trustees.
How many trustees can / should there be?
A trust must have at least two trustees but can have up to four trustees.
What if I fall out with one of my trustees? Does that mean there is a stalemate?
The trust deed contains an express power for the settlor to appoint and remove other trustees. Therefore, if the settlor and a trustee have a falling out, the settlor simply removes the hostile trustee and replaces him / her with another trustee. Of course, this is all dependent on the settlor having mental capacity.
Could I not just gift my house to my children?
Yes, you could – but imagine what would happen if your child’s relationship or marriage broke up, or if he / she became bankrupt or if you fell out with them in any way – your child would own your home and that is not necessarily a good position to be in under any of those circumstances!
I have read that trusts are taxed at 45%. This concerns me.
The tax rate of 45% relates to “unassigned income” into a trust. When your home is in trust (and it isn’t being rented out) the trust will not be receiving any income. Therefore, you do not have to worry about income tax.
Will there be any capital gains tax to pay when the trust is set up?
You never pay capital gains tax when you sell or otherwise transfer your main residence, so, no you will not pay any capital gains tax.
Is there any stamp duty to pay?
No, this transaction is exempt under Schedule L of The Stamp Duty (Exempt Instruments) Regulations 1987.
Are you able to guarantee that this planning will work?
Absolutely not. What we can guarantee is that if you do nothing at all, assets (including your home) over the value of £23,500 will be taken from you should any form of long term care be required. If the planning doesn’t work, the money you have paid would only have been used to pay for your care anyway.
Is the law likely to change?
Changes in the law are inevitable. However, in most cases, should a law change it is unlikely to change with retrospective effect. It would be an incredibly unpopular move, politically, to ask hundreds of thousands of people who have set up a trust to “unwind” the planning they have done.
Does this process make moving expensive and complicated?
No. When your house is owned by a trust, and it needs to be sold it will require the signature of all of the trustees. That is it – no more complicated or expensive than if you were selling your house as private individuals. The trusts have a lifespan of up to 125 years and so they do not need to be set up again when you move to a new house.
Does having a mortgage complicate things?
In a word, no. However, if you do have a mortgage or are likely to need one in the future, we can talk this through with you in greater depth.
So, are there any downsides?
In our view, there are no “downsides” per se. If you do not require means tested care the trust could potentially benefit you and your family in a number of other ways. And if, for whatever reason, the trust failed completely you would be in no worse a position that if you had done nothing at all.
For more information or to arrange a free online consultation visit www.elm-online.co.uk/